Investors who target new listings will be praying that Alibaba’s US float next month goes well. How markets greet the Chinese e-commerce giant – which could be valued at $200bn (£120bn) or more – may colour the fortunes of companies coming to market later this year.
Internet companies expected to float, such as German online retailer Zalando and web-investment group Rocket Internet, would benefit from a positive reception for Alibaba. That should bolster investor sentiment in the face of Europe’s economic struggles, flagging global equity markets and weak results from internet companies such as Amazon and Asos.
However, if a high-profile entrant like Alibaba stumbles, investors may give other newcomers the cold shoulder. Look no further than Google (GOOG) - which floated a decade ago this week – to see the power of so-called tentpole listings. Its shares have never dipped below their IPO price and, adjusted for a recent stock split, have risen 14-fold. That success story laid the groundwork for companies such as Facebook and now Alibaba to float.
Even if Alibaba shines, however, the outlook for future floats remains cloudy. A full 38 out of 104 first-half listings in Europe trade below their issue price, according to asset manager Blackrock. Shares in Pets at Home (PETS) have slumped by a fifth while Just Eat (JE.) has seen its stock slip by a quarter. That trend won't cheer investors, who expect strong gains for backing an unproven entrant. Twenty companies have even postponed their floats, many citing uncertain markets.
Nevertheless, three of the 10 largest floats worldwide last quarter took place on the London market: Zoopla, Just Eat and FDM – one of this week's tips; each raised $400-600m. Whether Alibaba thrives or flounders, investors can expect some strong UK players to emerge in the class of 2014.
